Louisiana Commercial Lease Agreement

A Louisiana commercial lease agreement is a legally binding contract between a landlord (lessor) and a business entity (lessee) for the rental of commercial property. Under Louisiana Civil Code Article 2668, a lease is defined as a synallagmatic contract where the lessor gives the lessee use and enjoyment of property in exchange for rent. ^[1] Once signed, this agreement becomes a binding contract outlining lease terms, rent amount, security deposit, late fees, and the respective obligations of both parties.

Legal Definition

Under Louisiana Civil Code Article 2671, a lease is characterized as "commercial, when the thing is to be used for business or commercial purposes." ^[2] Louisiana's Civil Code, derived from French and Spanish civil law traditions, provides a comprehensive framework for commercial lease relationships under Title IX (Articles 2668-2729). This includes provisions for lessor and lessee obligations, remedies for default, and lease termination procedures.

Types of Commercial Leases

There are three standard types of commercial lease structures that determine how operating expenses are divided between landlord and tenant:

1. Triple Net Lease (NNN)

The tenant pays base rent plus all operating expenses including property taxes, building insurance, and common area maintenance (CAM). This is the most common structure for single-tenant commercial properties. The landlord's responsibilities are minimal, typically limited to structural repairs.

2. Gross Lease (Full Service)

The landlord pays all operating expenses, and the tenant pays a single, higher rent amount. This structure simplifies budgeting for tenants as costs are predictable. Common in multi-tenant office buildings where individual expense allocation would be complex.

3. Modified Gross Lease

Landlord and tenant share operating expenses according to negotiated terms. Typically, the landlord pays property taxes and insurance while the tenant pays utilities and CAM, but arrangements vary. This hybrid approach offers flexibility for both parties.

Operating Expenses Typically Include: property taxes, building insurance, common area maintenance (CAM), landscape maintenance, HVAC maintenance and repairs, utilities (electricity, water, gas), janitorial services, security, and property management fees.

Essential Lease Terms

A comprehensive Louisiana commercial lease agreement should include the following key provisions:

Parties and Premises: Full legal names of landlord and tenant (if LLC or corporation, include state of formation), complete property address, and specific description of leased space including square footage.

Lease Term: Start date, end date, and term length. Commercial leases typically run 3-10 years. Include renewal options and required notice periods for renewal or termination.

Rent and Payment Terms: Monthly rent amount, due date, acceptable payment methods, and late fee provisions. Specify whether rent includes expenses (gross) or is base rent only (NNN).

Security Deposit: Amount required and terms for return. Louisiana has no statutory limit on commercial security deposits, and terms are negotiable between parties. ^[3]

Permitted Use: Specific business activities allowed on the premises. This should align with local zoning requirements and any restrictions in the landlord's insurance policy.

Maintenance and Repairs: Clear allocation of responsibility for structural repairs, HVAC systems, plumbing, electrical, and general maintenance.

Required Disclosures

Agency Disclosures (Conditional)

When a licensed real estate agent is involved in a commercial lease transaction, Louisiana law requires specific disclosures. Under LA Rev Stat Section 37:1467(A), licensees must provide parties with an agency disclosure informational pamphlet from the Louisiana Real Estate Commission. ^[4] If dual agency exists (agent represents both landlord and tenant), a dual agency disclosure form is required under LA Rev Stat Section 9:3897(A). ^[5]

Landlord's Lien (lessor's Privilege)

Louisiana law provides landlords with a powerful security interest known as the "lessor's privilege." Under Louisiana Civil Code Articles 2707-2710, the landlord has a privilege (lien) over the tenant's movable property located on the leased premises to secure payment of rent. ^[6]

Key Aspects of Lessor's Privilege:

• Covers tenant's movable property found in and upon the leased premises
• Secures payment of rent only (not other damages or liquidated damages)
• Property can be seized while on premises or within 15 days after removal
• Enforcement requires judicial process (writ of sequestration) - self-help is NOT permitted
• May extend to sublessee's property to the extent sublessee owes rent

Subletting and Assignment

Under Louisiana Civil Code Article 2713, a tenant has the right to sublease, assign, or encumber their lease rights unless the lease expressly prohibits it. ^[7]

Key Provisions:

• Default Rule: Tenant CAN sublease or assign unless lease prohibits it
• Prohibition Interpretation: A prohibition on one right is deemed to prohibit all (sublease, assign, encumber)
• Strict Construction: Prohibitions are strictly construed against the landlord
• Ongoing Liability: Original tenant remains liable even after sublease or assignment
• Reasonable Consent: Landlord cannot arbitrarily refuse a qualified subtenant

Eviction Procedures

Louisiana eviction procedures are governed by the Code of Civil Procedure. Under Article 4701, when a tenant's right of occupancy has ceased, the landlord must provide written notice to vacate allowing not less than five (5) days to vacate the premises. ^[8]

Key Eviction Rules:

• Notice Period: Minimum 5 days notice to vacate (may be waived in lease)
• Waiver: Notice can be waived by written provision in the lease
• Filing: Landlord files a "rule for possession" with the court
• Court Jurisdiction: Justice of Peace Court for commercial leases up to $5,000/month rent
• Self-Help Prohibited: Louisiana law prohibits self-help evictions; judicial process required
• Unconditional Notice: Louisiana notices do not require a cure period

Lease Renewal and Termination

Reconduction (Automatic Renewal)

Under Louisiana Civil Code Articles 2721-2724, a lease may automatically renew ("reconduction") if the tenant remains in possession after the term expires without objection from either party. For commercial leases with terms longer than a week, reconduction triggers after the tenant remains in possession for one week. ^[9]

Notice Requirements for Termination (Civil Code Article 2728):^[10]

• Leases longer than a month: 30 calendar days notice before period ends
• Month-to-month leases: 10 calendar days notice before month ends
• Week-to-month leases: 5 calendar days notice before period ends

Ada Compliance Requirements

Federal ADA Title III applies to commercial properties in Louisiana, requiring accessibility for individuals with disabilities. ^[11]

Key ADA Considerations:

• Both landlords and tenants share responsibility for removing accessibility barriers
• Louisiana adopted 2010 ADA-ABA Accessibility Guidelines (effective October 1, 2011)
• Louisiana Office of State Fire Marshal enforces accessibility standards
• Civil penalties: up to $75,000 for first violation, $150,000 for subsequent violations
• Lease should clearly allocate ADA compliance responsibilities between parties

Insurance Requirements

Louisiana does not legally mandate insurance for commercial leases, but standard practice includes the following requirements that should be specified in the lease:

Typical Commercial Lease Insurance Requirements:

• Property insurance for full replacement value
• Commercial general liability: $1,000,000 per occurrence / $2,000,000 aggregate
• Landlord named as additional insured on tenant's policy
• Waiver of subrogation rights
• Certificate of insurance (ACORD forms) required
• 30-day notice of cancellation required

Recording the Lease

Under LA Rev Stat Section 9:2742, long-term leases should be recorded to protect the tenant's rights against future property buyers. A notice of lease can be filed instead of the full lease document for confidentiality. ^[12] Recording is particularly important for commercial leases exceeding three years.

How to Create a Louisiana Commercial Lease

Step 1: Identify the Parties

Include full legal names of landlord and tenant. For business entities, include the entity type (LLC, Corporation) and state of formation.

Step 2: Describe the Property

Provide complete address, suite/unit number, and square footage. Include any common areas or parking spaces included in the lease.

Step 3: Specify Lease Terms

Include start date, end date, renewal options, and termination notice requirements. Specify whether the lease automatically renews or requires affirmative renewal.

Step 4: Detail Financial Terms

Specify base rent, expense structure (NNN, Gross, Modified), security deposit, late fees, and any rent escalation provisions.

Step 5: Define Permitted Use

Specify allowed business activities. Ensure compliance with local zoning regulations and any building restrictions.

Step 6: Allocate Responsibilities

Clearly assign maintenance, repair, insurance, and ADA compliance responsibilities to landlord or tenant.

Step 7: Execute the Agreement

Both parties sign and date the agreement. While Louisiana does not require commercial leases to be notarized, notarization is recommended for leases that will be recorded.